By Advocate S. R. Agarwal
One is expected to exercise due care in the preservation of his/her property documents, as these are the only proof of the ownership of the property. As and when a property transaction takes place by way of transfer or assignment of the rights, title and interest therein, all the previous documents from the very root are passed on, in original, to the transferee, as per the well-established practice in such type of transactions. Not only for the transfer or assignment, as said, when financial assistance is required from the banks or a housing finance company, hereinafter referred as the ‘financial institution’, all the property documents in original are required to be submitted as a condition precedent, in-as-much as security is created in favour of the financial institution by way of deposit of title deeds, popularly known as equitable mortgage, as it is less expensive and time-consuming, as against the creation of the security by way of registered mortgage.
In terms of Section 58 (f) of the Transfer of the Property Act, mortgage by deposit of title deeds (equitable) is created when a person delivers his title deeds to a creditor with the intention to create a security thereon at a notified town. Thus as per the said provision, such mortgage is created by merely delivering any or more title deeds of the same property. Therefore, it is a well established practice in vogue that all the original title deeds relating to the same property right from the root are deposited in original with the creditor to rule out the possibility to any earlier charge or encumbrance on the property on the basis of any one or more original documents, because such charge cannot be known from the search of the records of the office of the Sub-Registrar, as the same is not required to be registered, except in the State of Tamilnadu, where a Memorandum of Deposit of the Title Deeds has, recently, been made compulsorily registerable.
Some time certified true copies of the documents, which are not available in original, are submitted under the belief of these copies being the original, which is a misconception in the sense that a certified true copy of a document can not be taken or deemed by any stretch of the imagination as the original. A person may obtain as many as certified true copies from the office of the Sub- Registrar, as he may desire, and the possibility of an earlier charge or encumbrance on the basis of the originals of such certified true copies may not be ruled out.
In Maharashtra from the eighties till the date of computerization of registration process in April 2002, the documents, relating to the property transactions lodged for registration in the offices of the Sub-Registrar, were sent to Pune for microfilming etc., and not returned to the parties. LIC Housing Finance Ltd., hereinafter referred as to the LICHFL, which started operations in the year 1988 faced the problem of the creation of the equitable mortgage in the absence of the original title deeds lodged for registration in the offices of Sub-Registrar. With a view to helping the prospective borrowers, LICHFL devised a procedure for creating an equitable mortgage on the basis of the Registration Receipt and, simultaneously, sending an Authority Letter by the executant of such a document to the office of the Sub-Registrar concerned to send the document, after registration, directly to LICHFL.
It was thought at that time that such an Authority Letter would be taken note of in the office of the Sub-Registrar and the document will not be released, without the No objection from LICHFL. The same procedure was adopted by the banks when the housing finance sector was opened up for the banking sector and other housing finance companies came into the market. But the said belief of LICHFL of not delivering the documents by the offices of Sub-Registrars without their NOC stands belied by the present practice of managing delivery of the documents by the parties from said procedure has been gone through, security by way of equitable mortgage cannot be legally created in the absence of the original documents and, therefore, registered mortgage is the only way out, if a financial institution decides to accept such property as security.